Measure M in Los Angeles and Oakland

Please find a brief update on the passage of Measure M in Los Angeles, and Oakland’s ordinance.

LOS ANGELES

On March 7, 2017, voters in the City of Los Angeles voted to approve Measure M, a citizen sponsored measure also referred to as the Los Angeles Marijuana Regulation and Safety Act (“LAMRS”). Measure M allows the City of Los Angeles to issue permits for a variety of commercial cannabis activities. Below are some highlights from the new law.

Permit Types Allowed:

Under LAMRS the City is authorized to issue permits for the following activities:

Cultivation

Dispensaries

Manufacturing

Testing

Distribution

Permit Timelines:

LAMRS requires the City to release an application for manufacturing permits within 90 days of March 8, 2017; and

Applications for distribution, cultivation, testing, and transportation must be released by January 31, 2018

Other Highlights from LAMRS:

Allows currently licensed dispensaries to apply for and receive dispensary and cultivation (indoor up to 22,000 sf) permits on existing premises before anyone else;

City has discretion to determine total number of dispensary, cultivation, manufacturing, testing, distribution, and transportation permits it would like to issue; and

Currently licensed dispensaries do not count against any cap set by the City.

OAKLAND

On Tuesday, March 7, the Oakland City Council met to discuss the following cannabis-related ordinances:

The City Council conducted a first reading and voted unanimously to adopt both ordinances. These ordinances, along with some last minute amendments made during the meeting, bring about some rather significant changes to the original draft ordinances we reviewed for permitting of commercial cannabis within Oakland. Below is a summary of the new ordinances, inclusive of the newly added amendments.

1.Three Year Residency Requirement

A significant amendment that was made during the March 7 meeting, and that was incorporated into the approved ordinances, is a requirement that all applicants for a commercial cannabis permit must have resided in Oakland for the previous three years. This requirement applies to all General Applicants (non-Equity Applicants), whether or not they are participating in the Incubator Program.

Although either an individual or a business entity can be an "Applicant" under the ordinances, it was clear in the discussion surrounding this amendment during the March 7 meeting that its intent was to prevent non-Oakland residents from owning cannabis businesses within Oakland. Therefore, it is likely that even if an entity, rather than an individual, is acting as an applicant, this three year residency requirement will be applied to the individual owners of the entity. "Ownership" is defined in the ordinances as holding a 50% or greater interest in a for-profit entity, or a majority of the seats on the board of directors for non-profit entities.

Several of the City Council Members expressed a desire to create an exception to this three year residency requirement for General Applicants who participate in the Incubator Program. It was decided, however, to bring this exception in a future action rather than including it in the ordinances as voted on at the meeting. Thus, while currently the three (3) year residency requirement applies to all applicants, there is at least a possibility that such an exception will be added in the future for those General Applicants that support an Incubator Program for an Equity Applicant.

2.Equity Permitting Program

The ordinances initiate an "Equity Permitting Program" that provides special benefits such as interest free loans, industry specific technical assistance and waivers from permitting fees to businesses owned by certain individuals. To qualify as an applicant for the Equity Permitting Program (Equity Applicant), the business must be owned by an individual earns less than 80% of Oakland's average mean income, and either has resided in a specified high crime neighborhood for 10 of the last 20 years, or was arrested in Oakland and convicted for a cannabis related crime after November 5, 1996.

Until the Equity Permitting Program is fully up and running, an "initial permitting phase" will be implemented. During this initial phase, at least 50% of permits issued must go to Equity Applicants (the remainder to General Applicants who meet the 3 year residency requirement). The ordinances define a General Applicant as any applicant that is not an Equity Applicant.

3. Incubator Program

To encourage accessibility to the industry for Equity Applicants, the ordinances lay out criteria for an "Equity Incubator." A General Applicant who provides, rent free, at least 1000 square feet of space to an Equity Applicant to conduct its operations for at least three (3) years will be considered an Equity Incubator and will receive the next available Permit available for a General Applicant. The Equity Incubator must also provide the required security measures. The biggest risk to the Equity Incubator is if the Equity Applicant goes out of business or otherwise ceases operations within the 3 year period. If this occurs, the Incubator/General Applicant must re-apply for a permit and seemingly go to the back of the line behind other applicants waiting for a permit.

CONCLUSION

Clearly there are a lot of issues left to resolve, understand and navigate in both ordinances. But the passage of ordinances (despite their problems) in these two major metropolitan areas in the State of California are monumental for the legal cannabis movement.

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